Insights

Our thinking, exposed.

Best Practices: Back-up Cameras

Posted on: April 7th, 2014 by Editorial Staff

The National Highway Transportation Safety Administration just issued a much-delayed rule requiring backup cameras on all light vehicles by 2018.

For several years now, ALG has recognized the value in many of the safety features that would eventually become standard due to regulations, such as stability control and side airbags. While anti-lock brakes are not required in the US market, studies have confirmed their value, and there are very few vehicles on which they’re not standard. ALG has determined that, with ABS being a hard add feature, those vehicles that lack ABS suffer a degradation in value of over $200 after 36 months, which can decrease its residual value by up to 2 points. (more…)

Are Plug-ins the Future?

Posted on: March 19th, 2014 by Editorial Staff

In a recent Automotive News interview, Toyota Chairman Takeshi Uchiyamada, the “father of the Prius”, made a prediction about hybrid sales reaching 20% of the total global market soon. But regarding plug-in hybrids more specifically, Uchiyamada was more hesitant. Toyota, it seems, doesn’t yet believe the payoff for plug-ins is there, with the cost of the larger batteries still an issue. We’re inclined to agree, with caution baked into our forecast for plug-ins versus their regular hybrid stablemates. We’ve taken a look at the hybrid and plug-in lineups at both Toyota and Ford, and the following chart offers an illustration of how the two powertrain options compare within a given model.

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March/April 2014 Canada Industry Report

Posted on: March 18th, 2014 by Editorial Staff

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March/April 2014 Industry Report

Posted on: March 4th, 2014 by Editorial Staff

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Best Practices: Bluetooth

Posted on: March 3rd, 2014 by Editorial Staff

SYNCAt ALG, we have the benefit of exposure to a wide range of vehicles in just about every segment on the market. This also means we experience a vast array of in-car technology, which in the past decade has moved from including things like CD players and navigation to an endless range of safety, comfort and entertainment options.

In this new blog series, we’ll explore some of the ways that automotive brands manage to integrate and execute these increasingly complex features. We’ll show you the best practices that make the cabin experience better, and we’ll politely point out some of the ways that current executions could improve.

The first feature we’ll tackle is one that is becoming de rigeur for the latest generation of vehicles, as more and more drivers carry their music with them on a mobile device. No longer just for carrying on a hands-free phone conversation, Bluetooth lets you stream media stored on your device or straight from the Internet, through apps like Pandora and Spotify. (more…)

Reigning in Volume Ambitions

Posted on: February 21st, 2014 by Editorial Staff

FerrariFerrari recently announced that it had strengthened its bottom line by actually cutting production. The Italian exotic brand sold 5.4% fewer cars in 2013 than it had the year before–intentionally–yet its net went up by the same percentage.

Ferrari is clearly a special case, with its total volume of 7,000 cars worldwide making it one of the most exclusive marques on the planet. But the extremes can often elucidate basic phenomena, and in this case it shows how scarcity can elevate perceived value.

We’ve written previously about the drive for market share and the impact of adding incentives when those goals come up short. However, the hidden impact is the effect of used supply when it comes to resale values; it is one of the primary drivers of our residual value analytical model. If there’s plenty of demand for a brand in the marketplace, then a naturally high level of sales wouldn’t result in a later glut on the used market. But if sales are artificially inflated with incentives, it creates a one-two punch of higher used supply in the pipeline that is also composed of vehicles that began their depreciation from a lower starting point.

Nissan is clearly not going to restrict its volume to a level at which buyers consider it a coveted badge similar to Ferrari. But the company can allow volumes for the Altima to follow the natural demand patterns of the market, rather than pushing incentives to support the brand’s goal of doubling US sales by 2017, which we addressed last year. This can have a deep impact on the appropriate pricing level within buyers’ minds in both the new and used markets–Ferrari has certainly illustrated this–which has significant long-term implications for the brand.

ALG 101: Soft Add Calculations

Posted on: February 14th, 2014 by Editorial Staff

alg101This post expands on some principles examined in previous posts, including hard adds versus soft adds and the residual percentage calculation. If you haven’t read those, it may be helpful to review them first.

As we explored previously, soft add calculations are an integral part of our residual forecast. They help inflate the denominator of the residual calculation to account for equipment that’s not already baked in–”non-typical” equipment with a take rate under 50%. If a buyer selects a whole array of equipment that inflates the MSRP but is not expected to retain much in the used market, this factor helps to control for the fact that the residual percentage will still be applied to the inflated MSRP.

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A Diesel Tipping Point?

Posted on: February 7th, 2014 by Randy Lioz

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BMW debuted two new diesel models at the Chicago Auto Show, bringing the total lineup to six offerings from the Bavarian brand that rely on compression ignition. Having driven the 535d for the past week, it’s clear to me that BMW has put forth a rock-solid case for buying the diesel over the gas model, and I presume the same will be true of the 7 and X3 when the 740Ld xDrive and X3 xDrive28d hit the market. This experience behind the wheel combines with the relatively tight supply picture to create an environment of high retention for these vehicles in the used market. (more…)

Consistency or Homogenization

Posted on: January 27th, 2014 by Editorial Staff

BMW has long been known for identifiable brand characteristics, with its twin-kidney grille and “Hofmeister kink” consistently complementing the propeller roundel since the 1960s. And while BMW’s “Angel Eyes” LED accents emphasized another prominent brand signature, the dual circular headlights, LED lighting effects were in recent years more identified with Audi, which has become somewhat of a styling pioneer. Not to be outdone, Mercedes has recently stepped up its design game, with lauded looks coming in the form of the CLS and CLA “4-door coupes”.

One pitfall of pioneering design, though, is the impulse to fall back on those elements that have achieved market success. Audi just introduced the A3 sedan at the Detroit Auto Show, and it’s another fabulous-looking car from VW’s premium brand. But one may be hard-pressed to tell it apart from its A4 big brother, or even the A6 for that matter. See if you can figure out which is which below. (more…)

January/February 2014 Canada Industry Report

Posted on: January 24th, 2014 by Editorial Staff

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